Oil prices reduce gains as U.S. crude stocks soar

WASHINGTON, U.S. - Oil prices fell on Friday as U.S. crude inventories rose for a seventh week, even as members of the Organization of the Petroleum Exporting Countries and other producers cut output as part of a deal reached in December last year.

The United States, however, is not part of the deal and continues to increase its production, exporting a record amount of crude oil - crossing a million barrels a day for a second week and filling the gap in world markets created by OPEC's cut in output.

U.S. crude stocks rose by 564,000 barrels in the week to February 17, according to the Energy Information Administration (EIA), although the increase was below analysts' expectations for an increase of 3.5 million barrels. 

The smaller-than-expected increase was largely due to markedly lower volumes of imported crude, possibly a sign that supply cuts by major oil exporters are manifesting in the U.S. analysts said.

Oil prices slipped from previous week, but the four-week average remains 7.5 percent above the average during the same period last year.

Benchmark Brent crude oil was down 48 cents at $56.10 per barrel at 0908 GMT, while U.S. West Texas Intermediate traded at $54.06 per barrel, down 39 cents.

"Prices continue to retreat on repeated failure to rise above the upper end of their trading ranges and yesterday's inventory data also weighs," said Carsten Fritsch, analyst at Commerzbank in Frankfurt.

Under a landmark agreement reached at the end of the last year, a group of 20 oil producers, including members of OPEC, have cut production in the past month.

Since the production cuts, oil prices have moved up, however, continued supplies from the United States is preventing them from breaching the $60 per barrel mark.

"OPEC's got a competitor. No doubt about it," said Kyle Cooper, a consultant with Ion Energy Group. 

"They certainly have to be concerned with U.S. oil producers eating into their market share."

Meanwhile, gold prices rose on the back of U.S. Treasury Secretary Steven Mnuchin's remarks that the new Trump administration policies will probably have limited impact in 2017.